Saudi Arabia has a large-scale project for direct reduced iron (DRI) pellet production to be newly set up in the coming years. The investment, a part of the Saudi Vision 2030 development strategy, aims to help steel producers in the region to secure their positions in terms of raw material supply and to eventually support their competitiveness in terms of production costs.
Saudi Arabia Iron Ore (SAIRON) has a project to install a total of 12 million mt per year capacity for DRI pellet production in the southwest of Saudi Arabia in the coming years. The construction of the first 6 million mt facility is expected to begin in early 2020 and to take around one year and a half; the second asset of the same capacity will follow right away, according to a source familiar with the situation. The DRI pellet production will be based on the iron ore pellet feed with 66 and higher percent of Fe content.
At the initial stage, the pellet feed will be supplied from some non-traditional outside source, not to be disclosed for the moment. With time, the company plans to also develop the local mines located in the northwest of Saudi Arabia. No further diversification plans have been confirmed by SAIRON yet, although the establishment of the regional DRI production hub may be considered for the future.
The investment worth around $2.5 billion targets to ease the DRI pellet supply worries across the Middle East and North Africa (MENA) region and to generally support steel producers. SAIRON plans to supply DRI pellets through off-take agreements to the manufacturers in the Gulf Cooperation Council (GCC) area as well in the North Africa, in Egypt in particular. “This project targets to protect the steel industry here in the region and to give more opportunity to compete with China and India by having our own raw materials production,” a source told SteelOrbis. “We have to develop both upstream and downstream segments in order to survive,” he added.
The investment to develop a pelletizing capacity this size can be considered as a positive sign for the DRI pellet segment globally and in the MENA region specifically. The supply situation was first seriously challenged by the Samarco accident back in 2015; in addition, early this year the Vale dam accident disturbed the market. The new 12 million mt project will be an addition to the Vale Oman (around 10 million mt DRI pellet capacity) and Bahrain Steel (11 million mt) facilities, currently operational in the GCC.